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2013 Global Manufacturing Competitiveness Index: CEOs See Emerging Nations Surge as U.S., Germany and Japan Face Changing Game

November 16, 2012

WASHINGTON, Nov. 16, 2012 /PRNewswire/ — Over the next five years, 20(th)-century manufacturing stalwarts like the United States, Germany and Japan will be challenged to maintain their competitive edge against emerging nations such as China, India and Brazil, according to the “2013 Global Manufacturing Competitiveness Index” (Index) from Deloitte Touche Tohmatsu Limited’s Global Manufacturing Industry group and the U.S. Council on Competitiveness.

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The Index confirms that the landscape for competitive manufacturing is in the midst of a “massive power shift” – based on an in-depth analysis of survey responses from more than 550 chief executive officers (CEOs) and senior leaders at manufacturing companies around the world.

The Index lists the United States as the world’s third most currently competitive manufacturing nation, but ranks it fifth just five years from now, only slightly ahead of the Republic of Korea. The three other developed nations currently in the top 10 also fall in five years: Germany drops from second to fourth place, Canada slides from seventh to eighth place and Japan drops out of the top 10 entirely, falling to 12(th) place.

Further, it finds that Germany’s slide in competitiveness holds true for several other European nations, including the United Kingdom, France, Italy, Belgium, the Netherlands, Portugal, Poland and the Czech Republic, which are all expected to experience a dramatic decrease in their ability to compete. Poland, for example, drops from 14(th) to 18(th) place on the Index, while the United Kingdom drops from 15(th) to 19(th) place.

“America and Europe have continued to watch emerging markets mature and become formidable competitors over the past decade,” said Craig Giffi, vice chairman, Deloitte LLP and consumer and industrial products industry leader, who co-authored the report and lead the research team.

Giffi points out that in five years key emerging nations are expected to “vault forward” in the Index: Brazil jumps from its current eighth place slot to third place and India jumps from fourth to second place. China remains firmly in first place.

2013 Global Manufacturing Competitiveness Index

                     Current competitiveness                   Competitiveness in five
                                                                      years
             ----------------------------------------          -----------------------
        Rank           Country name                 Index score       Rank                   Country name        Index score
                                                   10=High 1=Low                                                10=High 1=Low
    ---                                            -------------                                                -------------
         1                 China                                  10               1             China                         10
        ---                -----                                 ---             ---             -----                        ---
         2                Germany                               7.98               2             India                       8.49
        ---               -------                               ----             ---             -----                       ----
         3       United States of America                       7.84               3            Brazil                       7.89
        ---      ------------------------                       ----             ---            ------                       ----
         4                 India                                7.65               4            Germany                      7.82
        ---                -----                                ----             ---            -------                      ----
         5           Republic of Korea                          7.59               5   United States of America              7.69
        ---          -----------------                          ----             ---   ------------------------              ----
         6                Taiwan                                7.57               6       Republic of Korea                 7.63
        ---               ------                                ----             ---       -----------------                 ----
         7                Canada                                7.24               7            Taiwan                       7.18
        ---               ------                                ----             ---            ------                       ----
         8                Brazil                                7.13               8            Canada                       6.99
        ---               ------                                ----             ---            ------                       ----
         9               Singapore                              6.64               9           Singapore                     6.64
        ---              ---------                              ----             ---           ---------                     ----
         10                Japan                                6.60              10            Vietnam                      6.50
        ---                -----                                ----             ---            -------                      ----
         11              Thailand                               6.21              11           Indonesia                     6.49
        ---              --------                               ----             ---           ---------                     ----
         12               Mexico                                6.17              12             Japan                       6.46
        ---               ------                                ----             ---             -----                       ----
         13              Malaysia                               5.94              13            Mexico                       6.38
        ---              --------                               ----             ---            ------                       ----
         14               Poland                                5.87              14           Malaysia                      6.31
        ---               ------                                ----             ---           --------                      ----
         15           United Kingdom                            5.81              15           Thailand                      6.24
        ---           --------------                            ----             ---           --------                      ----
         16              Australia                              5.75              16            Turkey                       5.99
        ---              ---------                              ----             ---            ------                       ----
         17              Indonesia                              5.75              17           Australia                     5.73
        ---              ---------                              ----             ---           ---------                     ----
         18               Vietnam                               5.73              18            Poland                       5.69
        ---               -------                               ----             ---            ------                       ----
         19           Czech Republic                            5.71              19        United Kingdom                   5.59
        ---           --------------                            ----             ---        --------------                   ----
         20               Turkey                                5.61              20          Switzerland                    5.42
        ---               ------                                ----             ---          -----------                    ----
         21               Sweden                                5.50              21            Sweden                       5.39
        ---               ------                                ----             ---            ------                       ----
         22             Switzerland                             5.28              22        Czech Republic                   5.23
        ---             -----------                             ----             ---        --------------                   ----
         23             Netherlands                             5.27              23            Russia                       5.04
        ---             -----------                             ----             ---            ------                       ----
         24            South Africa                             4.92              24          Netherlands                    4.83
        ---            ------------                             ----             ---          -----------                    ----
         25               France                                4.64              25         South Africa                    4.77
        ---               ------                                ----             ---         ------------                    ----
         26              Argentina                              4.52              26           Argentina                     4.58
        ---              ---------                              ----             ---           ---------                     ----
         27               Belgium                               4.50              27            France                       4.02
        ---               -------                               ----             ---            ------                       ----
         28               Russia                                4.35              28           Colombia                      4.01
        ---               ------                                ----             ---           --------                      ----
         29               Romania                               4.09              29            Romania                      3.98
        ---               -------                               ----             ---            -------                      ----
         30        United Arab Emirates                         3.93              30            Belgium                      3.63
        ---        --------------------                         ----             ---            -------                      ----
         31              Colombia                               3.85              31             Spain                       3.63
        ---              --------                               ----             ---             -----                       ----
         32                Italy                                3.75              32     United Arab Emirates                3.58
        ---                -----                                ----             ---     --------------------                ----
         33                Spain                                3.66              33         Saudi Arabia                    3.46
        ---                -----                                ----             ---         ------------                    ----
         34            Saudi Arabia                             3.57              34             Italy                       3.45
        ---            ------------                             ----             ---             -----                       ----
         35              Portugal                               3.39              35             Egypt                       3.45
        ---              --------                               ----             ---             -----                       ----
         36                Egypt                                3.24              36            Ireland                      3.03
        ---                -----                                ----             ---            -------                      ----
         37               Ireland                               3.23              37           Portugal                      2.87
        ---               -------                               ----             ---           --------                      ----
         38               Greece                                1.00              38            Greece                       1.00
        ---               ------                                ----             ---            ------                       ----

Source: Deloitte and U.S. Council on Competitiveness – 2013 Global Manufacturing Competitiveness Index

“While several nations in the Americas will continue to show significant manufacturing potency – with the United States, Brazil, Canada and Mexico all in the top 15 most competitive nations five years from now – many advantages are tilting toward Asia, which are expected to have 10 of the top 15 most competitive nations within the decade,” said Giffi.

Deborah L. Wince-Smith, president and CEO of the U.S. Council on Competitiveness, views the perceived decline of America and other developed nations as an alarming trend requiring immediate action.

“We need to better understand the highly complex forces driving the future of manufacturing and many of the structural changes reshaping the global economy. Emerging nations are growing fast and strong. Wise policies and practices could unleash American strengths, turbo-charge our manufacturing engines, and raise technology commercialization to new heights – driving U.S. economic growth and job creation,” she said.

“For any nation, manufacturing matters because it creates a platform on which research and development can deliver new ideas, products, and further advances in technology,” said Joe Echevarria, CEO, Deloitte LLP. “As a country’s manufacturing capabilities become more advanced and the workforce becomes more skilled, all stakeholders – the nation, its businesses and its citizens – enjoy the economic benefits that result.”

U.S. Still Boasts Technology Prowess

According to Wince-Smith, even though the United States is expected to slide in the Index in five years, it is still a powerful competitor – one that is poised to lead the technological transformation in manufacturing.

“The image of manufacturing as dumb, dirty, dangerous and disappearing is far from accurate,” she said. “Today, U.S. manufacturing remains at the technological forefront; it has become smart, safe and sustainable – and this powerful brand of domestic manufacturing is surging nationwide.”

Wince-Smith points out that two years ago, Deloitte Touche Tohmatsu Limited and the U.S. Council on Competitiveness developed a similar index to their new edition, which ranked the United States in fourth place – less competitive than this year’s third place ranking. Similarly, Germany improved from eighth place to fourth place between the 2010 Index and the 2013 Index.

The net gain in both countries shows that 20(th)-century powerhouses can still stake out winning ground and can more than hold their own in areas like advanced manufacturing.

Talent Leads the Way

The Index found that access to talented workers is the top indicator of a country’s competitiveness – followed by a country’s trade, financial and tax system, and then the cost of labor and materials.

“Nothing was more important to CEOs than the quality, availability and productivity of a nation’s workforce to help them drive their innovation agendas,” said Giffi. “Enhancing and growing an effective talent base remains the clear core of competitiveness among the traditional manufacturing leaders – and increasingly among emerging market challengers as well.”

Drivers of global manufacturing competitiveness

    Rank               Drivers
    ----               -------
    1                  Talent driven innovation
    ---                ------------------------
    2                   Economic, trade, financial and tax
                        system
    ---                -----------------------------------
    3                   Cost and availability of labor and
                        materials
    ---                -----------------------------------
    4                  Supplier network
    ---                ----------------
    5                  Legal and regulatory system
    ---                ---------------------------
    6                  Physical infrastructure
    ---                -----------------------
    7                  Energy cost and policies
    ---                ------------------------
    8                  Local market attractiveness
    ---                ---------------------------
    9                  Healthcare system
    ---                -----------------
    10                  Government investments in
                        manufacturing
    ---                --------------------------

Source: Deloitte and U.S. Council on Competitiveness – 2013 Global Manufacturing Competitiveness Index

The Index reveals several schisms in competitiveness between established manufacturing players and their emerging counterparts, most notably:

  • Traditional manufacturing stalwarts are perceived to have an advantage with respect to talent-driven innovation. More than 85 percent of global executives “strongly agree” or “agree” that the availability of quality skilled talent in the United States, Germany and Japan makes those nations highly competitive – while just 58 percent say the same about China and 40 percent say it about India.
  • Established manufacturing nations scored far better than emerging manufacturing nations when it came to local economic, trade, financial and tax systems. More than seven in 10 global business leaders “strongly agree” or “agree” that Germany and the United States have an extreme competitiveness advantage based on this criterion, but only 43 percent say the same about India.
  • Superior healthcare systems are viewed as giving established manufacturing nations a distinct advantage over emerging players thanks to their access to quality care and regulatory policies for public health. More than seven in 10 business leaders believe that the healthcare systems in the United States, Germany and Japan make them extremely competitive, but no more than three in 10 say that about China, India and Brazil.
  • When looking at labor costs and availability, stalwart manufacturing nations find themselves squarely on the defensive. Almost nine in 10 global executive believe China and India are extremely competitive with respect to the local cost and availability of labor, but fewer than four in 10 believe the same about the United States, Germany and Japan.
  • The newest of the emerging superpowers have a long way to go when it comes to supplier networks. Five in 10 executives or fewer “strongly agree” or “agree” that India and Brazil are extremely competitive relative to their supply networks, compared to the eight in 10 or more who say the same thing about the United States, Germany and Japan.
  • Emerging manufacturing nations continue to struggle in regard to the perceived competitiveness of their legal systems. Fewer than four in 10 global business leaders “strongly agree” or “agree” that China, India and Brazil are extremely competitive relative to their legal systems, compared to the more than eight in 10 who feel that way about the United States, Germany and Japan.
  • Newer manufacturing players face an uphill battle when it comes to physical infrastructure competitiveness. Fewer than a quarter of business executives “strongly agree” or “agree” that India’s infrastructure makes it extremely competitive, but almost nine in 10 say the United States, Germany and Japan have a strong infrastructure advantage.

“The emerging superpowers in manufacturing will focus on building the advanced manufacturing capabilities and economic and political infrastructures that drive rapid growth and high value jobs for their citizens, forcing 20(th)-century manufacturing powerhouses to fend off the growing strength of more focused global competitors,” Giffi said.

Still, Giffi makes it clear that “manufacturing still matters a great deal for the economic prosperity of 20th-century powerhouses – and these nations continue to have enough going for them to stay in the game and even thrive.”

“In America, manufacturing is the cornerstone of our independence, economic prosperity and national security. Our economy requires a healthy and growing manufacturing sector to tackle the many problems we face such as job creation, debt reduction and infrastructure investments,” Wince-Smith said.

To download the “2013 Global Manufacturing Competitiveness Index,” please visit www.deloitte.com/globalcompetitiveness.

About the Study

The “2013 Global Manufacturing Competitiveness Index” is an initiative led by The U.S. Council on Competitiveness and Deloitte Touche Tohmatsu Limited designed to determine how CEOs view the competitiveness of the manufacturing industry in different countries around the world. A global CEO survey, which generated responses from 552 CEOs and senior executives, offers perspectives on the most important factors that drive manufacturing industry competitiveness. The global survey results also helped to create a unique “Global Manufacturing Competitiveness Index” ranking the relative manufacturing industry competiveness of countries and reflect how executives perceive this may change over the next five years. The in-depth study seeks to define excellence in manufacturing and draw out the implications for manufacturers in terms of the competencies required to develop and sustain an edge in a new competitive landscape. Participants were also asked to provide their views of the global economic conditions and government actions that can bolster competitiveness in the manufacturing industry. To learn more, visit www.deloitte.com/globalcompetitiveness.

About the U.S. Council on Competitiveness

The Council on Competitiveness is a leadership organization comprised of CEOs, university presidents and labor leaders committed to ensuring that the United States remains the world leader. The Council has one goal: to strengthen America’s competitive advantage by acting as a catalyst for innovative public policy solutions. For more information, please visit www.compete.org.

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

SOURCE Deloitte


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